Prudential Plc reveals demerger plans – includes SG$22 billion sale

Prudential Plc reveals demerger plans – includes SG$22 billion sale

On a day when it declared solid annual results, UK insurance giant Prudential Plc managed to steal its own thunder with a huge announcement – namely its plans to demerge M&G Prudential from Prudential Plc and partially sell off its UK annuity portfolio.

The move will result in two separately listed companies that will each offer their own distinct investment products – according to a release, M&G Prudential will be an independent savings and investment provider based in London and led by chief executive John Foley, while Prudential Plc will continue as an international insurance group headquartered in London but focusing on growth opportunities across the US, Asia and Africa, under group chief executive Mike Wells.

As part of the plans, the firm will sell £12 billion (around SG$22 billion) of its UK annuity portfolio to Rothesay Life.

“Under the terms of the agreement, M&G Prudential has reinsured £12.0 billion of liabilities to Rothesay Life, which is expected to be followed by a Part VII transfer of the portfolio by the end of 2019,” a statement read. “The capital benefit of this transaction will be retained within the group to support the demerger process.”

“Looking forward, we believe we will be better able to focus on meeting our customers’ rapidly evolving needs and to deliver long-term value to investors as two separate businesses,” said Wells. “Following separation, M&G Prudential will have more control over its business strategy and capital allocation. This will enable it to play a greater role in developing the savings and retirement markets in the UK and Europe through two of the financial sector’s most trusted brands, while Prudential plc will be able to focus on the attractive returns and growth potential of its market-leading businesses in Asia and the US.”

The demerger plans have grabbed the headlines away from a solid set of 2017 results for Prudential Plc. Its IFRS group operating profit of £4,699 million was up 6% thanks largely to double digit broad-based growth in new business profit in Asia.

“Our clear, consistent strategy, high-quality products and constantly improving capabilities have enabled us to deliver excellent progress across the Group, led by double-digit growth in our Asia business,” said Wells. “We have also achieved all of our 2017 objectives, which we set in December 2013. This represents the third set of objectives successfully achieved within the last 10 years.”

Its full year 2017 ordinary dividend increased by 8% to 47 pence per share.